Six cement units halt production due to 'unsustainable prices' Rs 230-240 per bag

[Naveed Yaseen]

Production halted at 6 cement units, govt losing Rs 10.3m daily

By Moonis Ahmed

KARACHI: Government may witness a revenue loss of Rs 400 million per month due to closure of cement companies on the backdrop of unsustainable prices of commodity in the local market, industry sources told Daily Times.

They further said that it is estimated that the government is incurring a revenue loss of Rs 10.3 million on daily basis due to the closure of cement companies.

On a 50 kg cement bag, Rs 35 is deducted as federal excise duty (FED) and Rs 32 is deducted under the head of sales tax and special excise duty," they added.

The prices in the northern zone were between Rs 325 to Rs 330 per 50 kg bag, while in southern zone these vary between Rs 350 to Rs 360 per 50 bag. The current price is hovering around Rs 230 to Rs 240 per 50 kg bag.

It is pertinent to mention that due to unsustainable prices of commodity in the local market, six cement-manufacturing units suspended their production at the start of the current month. These include Gharibwal Cement Limited, Dandot Cement Limited, Dewan Cement Limited, Flying Cement Limited, Dadabhoy Cement Industries and Pioneer Cement Limited.

During last three years cement export posted a healthy growth, however, the dispatches to the local market witnessed massive reduction. Therefore, cement manufacturers are selling the commodity at lower rates across the country to capture maximum market and enhance their sales.

Local cement manufacturers are operating their units to fulfil export orders and at the same time are compelled to sell the remaining production in local market at lower rates to meet operational expenses, they said.

During last five years, capacity utilisation has enhanced to 44 million tonnes per year against the local consumption of 21 to 22 million tonnes and export demand of about 10 million tonnes annually.

"Cement industry is passing through worst times, as many of the manufacturing units have been closed down due to operational losses," Sayeed Tariq Saigol, former chairman All Pakistan Cement Manufacturers Association (APCMA) told Daily Times.

Tariq said that unbelievably low construction activity and low government spending on Public Sector Development Programme (PSDP) have taken their toll on the industry.

The local demand has shrunk by 14 percent during 4MFY09 as compared with corresponding period of the last year. The exports front is also not very encouraging as export order from India and Afghanistan have dropped significantly. "Some 19 companies are listed on the stock exchanges of the country and their working is regulated by worthy professionals, however, they have been accused of cartelisation and fined Rs 6.6 billion by Competition Commission of Pakistan (CCP) due to which a panic was created in cement industry," he added. Sources said cement units have been facing massive losses for last few years and during 2007-08, some 17 units suffered Rs 8 billion loss.

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